On the surface, it seems nuts to think that Toyota might be having some trouble navigating the future.
It’s still the world’s largest automaker by volume. It was handsomely profitable last year. Here in the U.S., it’s staring down the barrel of tariffs like every automaker, but its big bet on hybrid cars is paying off remarkably well at a time when electric-vehicle sales could take a dip—although it has some very promising EVs coming out soon, too.
It seems like Toyota got everything right, more or less. So why are some employees reportedly concerned that it’s not moving quickly enough on the technology that will define the future of mobility?
A report on that situation kicks off this Monday edition of Critical Materials, our morning roundup of industry and technology news. Also on deck today: Tesla enters a kind of comeback mode, and Kia gets ready to cut incentives over tariff costs too. Let’s dig in.
30%: Toyota’s Reported Software Slowdown Has Employees Concerned
Photo by: Toyota
Here’s the thing: even if Toyota’s “multi-pathway” approach to offering gas, hybrid, EV and even hydrogen powertrains (including different mixes across different global markets) is working out great, the future of cars will still be heavily dependent on software. In-car apps, voice control, connected vehicles, smartphone integration, over-the-air updates, autonomous vehicles—the whole nine yards.
Put simply: even if you’re selling hybrid cars, you want your customers to pay for Microsoft Teams, or whatever software services you’re offering. Some of those things are features that drivers increasingly want. Others are key to long-term revenue goals.
But according to a new report from Bloomberg, Toyota is suffering from “internal inertia” when it comes to the digital side of what’s next for the car industry.
It starts with “a somewhat obscure Toyota business unit called the Digital Transformation Promotion Department,” established by now-Chairman Akio Toyoda, where employees from many different divisions “share a broad vision to introduce a more digitized future to a company with a stubbornly analog culture.”
But sources told Bloomberg they’re worried about the speed of this team’s progress, which is a fear shared externally as well. This is, in part, due to Toyota’s heavily entrenched, cautious and meticulous culture. And so far this team hasn’t been involved in software for the cars themselves, but for systems and processes around the company tied to development. Is that enough? From the story:
Some advocates for a software-led rethink at Toyota have grown disillusioned by what they see as a lukewarm commitment to reform from within, according to people familiar with the matter. They point to a recent decision to fold the Digital Transformation Promotion Department into a larger business unit, threatening to short-circuit its mission as a change agent.
[The] progress has been piecemeal and the division is far from achieving its longterm goals, the people familiar said.
Former employees who spoke anonymously with Bloomberg described a workplace bound by conformity, with a paternalistic bureaucracy that values harmony over new ideas. One ex-employee joined Toyota because they were interested in autonomous driving, but instead felt trapped for several years doing quality control on mundane electronic parts.
Toyota’s global success — its record as the world’s biggest automaker for five consecutive years and its status as Japan’s biggest and most important company — has arguably created a self-enforcing inertia. Talk among employees of transferring or quitting usually triggered the same reaction: Why would anyone want to leave?
Yet any automaker not willing to move more quickly on software development—which moves at a lightning pace compared the years- and decades-long development of traditional car hardware—risks being left behind. And not just from upstarts like Tesla, but from the Chinese automakers and even the big tech companies. As that story points out, traditional automakers are concerned about how Apple and Google are gunning for their in-car real estate now.
So is this a fair assessment of what’s going on at Toyota, or just a few disgruntled employees who feel like they’ve been sidelined?
It’s no secret that for all of Toyota’s sales success, it does feel behind on the digital front; the last bZ4X I tested didn’t even have in-car charging route planning. That had to be done via the smartphone app instead. But here in the U.S. at least, Toyota folks I have spoken to say they’re working hard and fast to close those gaps.
And it’s likely going to offer different technologies for different markets, as ever; the Toyota cars I saw in China had software powered by its Chinese partners, and I am not sure American consumers are even ready for all of that en masse just yet. More broadly, the entire Japanese auto industry is behind on software compared to China, Rivian and Tesla, hence the original Honda-Nissan deal to speed things up.
Software is a conundrum facing most traditional automakers. And by the time it really becomes a problem, it may already be too late.
60%: Tesla Enters Comeback Mode. But How, Exactly?
2026 Tesla Model Y Juniper
Photo by: Patrick George
Meanwhile, I’d argue Tesla has an opposite problem: advanced enough on software and technology, but lagging on carmaking itself. (Plus, all the Elon Musk stuff, too.) As the CEO steps away from politics, the company is making a big show of force that it’s getting back on track. Here’s what Bloomberg had to say about Tesla’s vice president of vehicle engineering, Lars Moravy, and a speech he gave at the company’s X Takeover in California this weekend:
Moravy, Tesla’s vice president of vehicle engineering, said he’s personally most excited about Semi truck — built at the company’s factory near Reno, Nevada — and called it key to the company’s mission. He spoke at the “X Takeover,” a day-long event in San Mateo.
“We take big swings, and sometimes that risk can come with a lot of downside,” said Moravy, who has been with Tesla for over 15 years. “We’re in a big swing moment right now with autonomy, Robotaxis, with Optimus and with Semi.”
It’s great, but more and more, investors are wondering: where’s the revenue?
Tesla is kicking off Robotaxi rides in San Francisco, albeit with humans in the driver’s seat and not the passnger’s seat like in Austin due to different regulations. (Technically, Tesla doesn’t have a permit to do this.) The Information (subscription required) reported that the Optimus project is “well behind the pace” to meet Musk’s goal of producing robots this year, due to challenges around the dexterity of its human-like hands. And this long-awaited “new” Tesla seems to be a de-contented Model Y.
Sure, Tesla has always been about promising the future. But it could use something a little more concrete for the present.
90%: Kia To Slash Incentives As Tariffs Hit
2025 Kia EV6 GT-Line European Spec Photos, Runaway Red
Photo by: InsideEVs
Meanwhile, despite heavy investments in U.S. production, the Hyundai Motor Group’s fast-growing Kia brand is going through some challenges because of tariff costs. It can make lots of cars in the U.S. (including electric options like the EV6 and EV9) but parts have to come from somewhere.
Expect fewer incentives and manufacturer-driven deals on new cars, Automotive News reports:
While Kia isn’t considering raising prices in the U.S., it plans to reduce spending on incentives. That’s expected to save about 600 billion won ($435 million) over the year, according to Jung Seong Kook, head of investor relations and strategic investment.
The company expects a deterioration in the business environment in the second half of the year due to tariffs, the end of U.S. tax credits for electric vehicles in September, and tougher competition in markets like Europe, Chief Financial Officer Kim Seung Jun said on an earnings call.
A 25% tariff on South Korean-made cars is set to take effect in the U.S. on Aug. 1.
100%: Which ‘Traditional’ Automaker Does Software Best?
BMW Neue Klasse EV Concept
I’d say it’s BMW, which we’d put in the camp of “mostly pretty good.” But we have reason to believe that the upcoming Neue Klasse cars will be even stronger—then again, it’s an all-new software platform, so if it launches without the usual bugs and other issues it’d be an auto industry miracle.
What’s your take on in-car software? Who does it best, and how much does that matter to you?
Contact the author: patrick.george@insideevs.com
